Last Friday we wrote a post discussing how under the government’s new Immigration Bill landlords will soon be expected to vet all their potential tenants in order to make sure that they are in the country legally. So far there has been a massive amount of criticism from private landlords over these new plans, especially as so many are concerned that vetting all their new tenants will be expensive, time consuming, and confusing. Continue reading
In the past few weeks we have been discussing how landlords and local councils across the UK have been trying to find ways to help their tenants that will be adversely affected by the upcoming bedroom tax, and now it seems some are taking even more extreme measures. For example, in Scotland, Dundee City Council have decided that they will not evict social housing tenants who struggle to pay their rent after their housing benefits are cut as part of the scheme.
The Council is now also calling upon private landlords with tenants that receive housing benefits to also be more lenient, and to use all reasonable means to prevent evictions after the welfare reforms have come into effect. The Council have already decided that any tenant that genuinely struggles to pay their rents will not be evicted from their homes, and instead will try to recoup the money using other means so that tenants can be secure in the knowledge that they will not lose their homes.
Housing minister Margaret Burgess said: “I have now written to landlords to encourage them to look sympathetically on tenants affected. We already have strong safeguards in place to ensure eviction is an absolute last resort. While we do not want to see tenants run up debts they cannot pay, it is important, in what will be challenging times, that extra consideration is given to people who are having housing benefit taken away. Dundee City Council has taken innovative action on this, clarifying that, where tenants are doing all that can be reasonably expected in order to avoid falling into arrears, they will use legitimate means to collect rent due, except eviction.”
“I know other councils are also working towards a similar position and I hope landlords across Scotland can follow this example. There are also circumstances where a bedroom’s classification may be changed and tenants not penalised. Again, I would encourage landlords to consider this possibility.” In order to help landlords and tenants who will be affected by the housing benefit cuts the Council has already made extra funding available, however there are also other ways landlords can cover losses from the cuts. Some landlord insurance policies include rent guarantee insurance which will cover the costs if your tenant fails to pay their rent, meaning that you will not have to consider evicting your tenant and replacing them in order to guarantee income.
Landlords from the private rented sector have been coming under fire recently due to the fact that many members of the public are finding it difficult to afford the increasing rent prices. However, the cost of rent is directly linked to the fact that there is not enough housing in the UK, and that landlords are more likely to be given loans to buy properties instead of first time buyers. However, this disposition towards landlords may soon change, as it was reported in The Independent today that the increase in private rental sector landlords will actually help reduce rent prices.
Rightmove has released its latest figures which state that the increase in landlords investing in buy-to-let properties will mean that there will be more affordable housing available to the UK public. Mile Shipside, director and housing market analyst at Rightmove said: “Buy-to-let investors, attracted by evidence of sustained demand and strong yields, will provide much needed supply relief to ‘Generation Rent’. A marketplace where landlords are achieving satisfactory returns will relieve some of the supply pressure in 2013, though the task seems to be falling on the comparatively rag-tag army of private landlords rather than more strategic institutional investment.”
The research has also shown that one in eight accidental landlords are now thinking of expanding their portfolios due to such good return on investment on their properties. Currently, around thirty per cent of landlords are accidental landlords, but almost forty four per cent are thinking about investing further in the buy-to-let sector this year. This will not only be good news for tenants, but also landlord insurance providers as they will also hopefully benefit from the increase in involvement in the landlord industry.
Shipside said: “In locations where property prices have fallen substantially or rents have risen more dramatically, landlords have invested and many seem willing to invest again. Some higher priced areas remain unattractive to the hard-nosed investor or risk-averse lenders. Those areas will continue to see the supply of rental property outstripped by demand putting further upwards pressure on rents. However, overall greater supply of rental property coming on tap is good news for tenants as it is likely to lessen the pace of rental growth in 2013.”
A North London council plans to offer private landlords cash incentives of up to £3,200 to take tenants off their waiting list. Around one-hundred local landlords attended the launch event which kicked off the council’s campaign to encourage more private landlords to sign up to the scheme.
Adverts appealing for landlords have been placed on buses, bus stops, Tube stations, and in full page adverts in the local newspapers. So far over 1,200 landlords have already signed up to the scheme, but the huge difference between social housing supply and demand means that a lot more landlords are needed if demand is to be met. Barnet is the latest council to try and convince local landlords to help with the housing crisis that is affecting the entire United Kingdom. The council are offering one of the most generous schemes available in an effort to get landlords to commit to the scheme. Barnet has also revamped its lettings service, Let2Barnet, to ensure it has the capacity to deal with further business. The service removes the hassle of finding a tenant and the service is open to private landlords, agents or a homeowner who wants to rent out their property.
Barnet Homes Chief Executive, Tracey Lees, said “The appeal of our scheme for landlords is that it removes the hassle and stress of managing their tenancy. For us it’s a great way to ease the increasing pressure on Barnet’s social housing and provide homes we can offer to many more individuals and families who approach us for help.”
Incentives on offer for landlords include a full management service, offering guaranteed rent and £500 towards their landlord insurance costs. At a time of increased housing need, the council believe this is a brilliant opportunity for landlords to have a guaranteed income for the next few years when it is hoped the housing problems will have improved.
Research has claimed that just over half of private landlords are seriously considering taking up the Green Deal initiative. According to the NLA (National Landlords Association) their latest Landlord Panel survey shows that 63% of landlords say they are aware of the Green Deal and 56% are considering taking advantage of it.
Under the Green Deal which is due to start on October 1st, private landlords will be able to get an upfront amount to make energy-saving improvements to their properties such as installing insulation or a brand new boiler. The loan for the improvements will be repaid through utility bills by the tenants. All privately rented properties with an F or G rated Energy Performance Certificate will be banned from the market after 2018 and if landlords do not act they will be eventually left with a property that cannot be legally let in six years time, even if it is protected with landlord insurance.
David Salusbury, chairman of the NLA, said “Whilst our research shows that many landlords are keen to take advantage of the Green Deal, a third of landlords are not yet aware of the initiative. We encourage landlords to become familiar with the Green Deal as the private-rented sector has a key role to play in ensuring Britain meets its energy targets. Furthermore, it is imperative that landlords future-proof their properties and their investments.”
The Green Deal is a private landlord’s opportunity to improve the quality of their properties and it also demonstrates their ability to work with the Government on initiatives which will make life better for tenants throughout the United Kingdom. However the RLA (Residential Landlords Association) are unhappy that tenants must repay a loan given to the landlord under the Green Deal scheme. They believe that some tenants will resent this, and will also not be very happy that they will have to pay higher utility bills until the loan is paid off. The RLA is asking the coalition to change the scheme so that it is the landlord who repays the Green Deal loans themselves.
The BSA (Building Societies Association) has warned the Welsh Government that their plans to regulate all private landlords could mean increased rents for tenants. They want the Government to carry out a full cost benefit analysis of the policy outlined in a White Paper in May before they become law.
Housing Minister Huw Lewis announced proposals that mean anyone wanting to let properties privately will have to sign a register before being allowed to have tenants move in. All private landlords will be expected to sign a mandatory register and they will also have to pass a fit and proper person test that will include having landlord insurance. The new scheme will apply to all landlords and agents, regardless of whether they let one property or they have a large portfolio of properties. The BSA are warning that there is a danger that the changes will see rents increasing as private landlords pass on the extra costs associated with registration, to their tenants.
BSA Mortgage Policy Advisor, Colette Best, said “The Homes for Wales White Paper suggests that the private rented sector should be regulated, to include a register for landlords and an accreditation scheme for those managing rented properties. The expectation is that the scheme will be self-financing with a modest fee for registration. Some of the areas of cost which will be involved are: setting up policies, decision making panels and separate appeals panels, plus a system to monitor which landlords and agents have registered. Similarly, there will be a need to decide how to handle those who choose not to register and the accreditation scheme will need to be set-up and managed, and codes of conduct enforced.”
If fees turn out to be very high it may see some landlords deciding to move out of the private sector altogether, with the potential knock-on of reducing supply. This would be bad news for tenants as the private rental sector has seen a surge in demand as people have struggled to get on the property ladder. The Welsh Government has acknowledged the comments from the Building Societies Association and say they will consider their input, along with observations made by other interested parties.
Two separate reports have been carried out that point to private landlords making steady returns over the next 13 years. The good news is down to rising rents and a house price recovery that will boost the sector.
Rents have already gone up by 4.5% over the last year and they are likely to be driven up further by the scarcity of mortgages being handed out by lenders, along with a shortage of good quality properties. The RICS (Royal Institution of Chartered Surveyors) predict that rents will rise by 4% on average throughout the United Kingdom over the next 12 months. The RICS survey also found that in the three months to July, the number of properties coming on to the market changed only marginally. However, demand among tenants is continuing to grow.
RICS Global Residential Director, Peter Bolton King, said “While tenant interest is still riding high, what remains to be seen is whether many are willing to meet the increasing rents being demanded by landlords. However, it is clear we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders. These barriers to home-ownership need to be addressed alongside the shortage of new stock coming to the market.”
The second report by the Council of Mortgage Lenders has said lending increased by nearly a fifth in the space of a year. They predict those investing in property and taking out buy-to-let property insurance will make capital as well as rental returns in the long term. House price growth is estimated to average at least 2% a year in real terms between 2012 and 2025. A huge lack of available properties will also push up prices later in the decade and when rents are added into the equation, a private landlord with a buy-to-let property can expect an average real return of 3% a year before tax.
New plans are in line to give each local authority the power to charge council tax on a property as soon as it becomes empty. The new rules could hit private landlords hard and also result in a huge administrative headache.
At the moment the law states that when a property becomes vacant, the owner is granted a period of six months before any council tax becomes payable. Coalition ministers want to end this mandatory requirement and are now proposing to replace it with a clause that would allow each local authority to charge whatever they like on an empty property for the first six months. This means that they could charge nothing, which is unlikely, the full 100% council tax, or anything in between. Cash-strapped councils will almost certainly see this as a way to bolster their finances.
Ian Sanford, of Pennington Homes in Huntingdon, said “With local authority finances under pressure in the present recession it is more than likely that authorities will choose not to grant council tax-free periods, which will have major financial implications for landlords and vendors alike. In addition, it will provide an additional administrative burden for letting agents in that they will have to advise local authorities of all vacant periods, most of which are often only of a duration of a few days. It is also likely that, in these cases, it will cost the local authority more to collect the small amounts than the additional revenue achieved.”
The proposal could clearly hit property investors with an interest in landlord insurance and it is interesting that the changes come at the same time as a much higher-profile move has grabbed the attention of private landlords. The Local Government Finance Bill going through Parliament will, when given the green light, allow local councils to charge higher amounts for properties empty for over two years; so it appears that landlords have extra incentives to ensure they keep their portfolio fully tenanted at all times.
The growth of property investors taking out landlord insurance and buy-to-let mortgages in a rural part of Scotland is at record highs, as the financial downturn shows no sign of picking up.
With experts in the Angus region of Scotland estimating it can take up to 15 years for prospective home owners to save up for a deposit on a house there is little surprise that the local rental market is booming, as tenants look for decent affordable accommodation. Local professional landlords are being joined in the sector by home owners who can no longer afford to live in the home they have mortgaged. They are also been joined by young and middle aged professional business people looking for a secure investment that will eventually realise a pension. It is this third type of landlord that appears to be in the majority as they bravely take a chance on utilising the equity they have in their current property to create a nest egg, and forge a secure future for themselves and their families.
Amanda Wiewiorka, who works for Wardhaugh Property Management Services in Forfar, said: “Anyone thinking of getting into buy-to-let, and the number is growing by the day as house prices fall, should take a five to ten year view, not look at this as a short-term plan. More landlords in Angus are buying up three to four bedroom homes which are popular with the growing number of families that are renting. This is a whole new market for buy-to-let and is particularly short on supply.”
The situation in Angus, which has around 5,500 properties privately rented out by 4,000 landlords, is mirrored across most of Scotland with industry insiders estimating there are approximately 1.2 million home owners collecting rents from tenants ensconced in one of their properties.
Private landlords with an interest in property insurance are being urged to get their paperwork in order after a recent landmark court case. The court ruled that a landlord seeking to recover service charges from a tenant was not entitled to it because the landlord used the letting agents address instead of their own.
By using the agents address, the landlord was deemed not to have served a valid demand and so nothing was due from the tenant. Section 47 of the Landlord & Tenant Act 1987 requires a landlord to give both their name and address in any written demand to a tenant. Using a managing agent’s address will not be good enough as it is not the landlord’s address. It is common practice for a private landlord seeking payment for sums due such as rent or service charges to ask their agent to do the work and for them to be named as the correspondent in all payment notices. The outcome of this case serves as an important reminder to landlords to get the technical details right or they may well lose out on money that is owed.
Caroline DeLaney, real estate disputes partner at London law firm Kingsley Napley, said: “Landlords and managing agents need to take urgent note of this case or suffer the consequences if their demand notices to tenants are found to be technically defective. An astute tenant can defer payment successfully, or at worst may be able to refuse to pay monies at all, if demand notices are not fully compliant with the Landlord & Tenant Act in terms of correct address details.”
The implications of the court’s decision may be much more far-reaching than is first apparent. For example, it may not be possible simply to re-serve the demand with a correct address; also if a tenant has already paid pursuant to a defective demand, they may be able to claim back the last six years worth of payments on the basis that they were paid under an invalid demand. Many private landlords are not happy because they do not want to disclose their home address to their tenant.